The art of completing your annual tax return: 10 FAQS answered

With tax filing season just around the corner, it’s time to start getting your paperwork in order — what should you and your tax practitioner consider before you submit your 2022 income tax return?

Depending on your individual financial situation, the process of completing your annual tax return may be a complicated one. It’s therefore advisable to obtain professional assistance to ensure you’ve covered all the bases and prepared your return correctly.

To help you with this, Sanlam Private Wealth — which offers its clients a comprehensive range of fiduciary and tax services, including local and offshore investment structuring, global estate planning, and tax administration and compliance — has answered 10 frequently asked questions.

By when should I file my tax return?

The tax return filing season is relatively short this year. For non-provisional taxpayers, it opens on July 1 2022 and effectively ends on October 24 2022. Provisional taxpayers (including many high net worth individuals) may file returns from July 1 2022 to January 23 2023.

When must the first provisional tax for the 2023 tax period be paid?

The first provisional tax payment in respect of 2023 is due on August 31 2022. Your tax practitioner will contact you regarding the information required and will calculate the taxes due for the year ahead. A submission will be done on your behalf and payment made where necessary.

Why is it important to update my details with the SA Revenue Service (Sars)?

If Sars doesn’t have your latest contact, address or banking details — either as an individual or as the registered representative of a trust — you may not be able to access your e-filing profile or receive refund payments which may be due to you.

What are the tax implications of donations, as well as medical expenses?

These are important factors to discuss with your tax practitioner — they can have a significant impact on your tax liability. Many taxpayers are not familiar with the process of donating to Section 18A-approved organisations, which could potentially entitle you to an income tax deduction of up to 10% of your taxable income in a given assessment year.

Your tax practitioner may also request evidence of medical expenses paid out of pocket during the year of assessment, in addition to your monthly medical aid contributions.

Is my wealth structured and invested in the most tax-optimal way — one that doesn’t compromise my investment objectives?

This is a conversation you need to have with your portfolio manager. The expert fiduciary and tax team at Sanlam Private Wealth can help you determine the most tax-effective way of structuring your local and offshore investments. Read more about this here.

What about taxes such as estate duty?

It’s important to draw up a comprehensive estate plan with a fiduciary specialist, which encompasses both your local and offshore assets, and takes into account taxes and duties to be paid both in SA and in other countries. This will ensure that the proceeds of your estate are distributed to your loved ones as efficiently and in the most cost-effective way possible. Read more about estate planning and securing your legacy here.

What happens if I am emigrating from SA and wish to cease tax residency with Sars?

If you have decided to cease tax residency in SA, it is crucial to inform Sars of your decision in writing. The date of cessation will also have to be included on your latest tax return submission, and all e-filing details updated, since the e-filing profile is the mechanism used to apply for your tax emigration clearance (TEC).

Again, ceasing tax residency can be a complex process — the Sanlam Private Wealth team can assist you in formalising this with Sars.

What happens if I left SA a long time ago with no intention of returning, but did not inform Sars of my cessation of tax residency?

You will have to obtain notification from Sars of the date of your cessation of tax residency as soon as possible to ensure compliance with Sars regulations. There may be complications if you left SA without paying the exit taxes due at that time — contact one of Sanlam Private Wealth's expert team members for advice and assistance.

What are the possible consequences of non-compliance by taxpayers?

Sars can impose severe penalties for non-compliance with tax obligations under South African tax laws. Non-compliance can include non-submission or late submission of income tax returns, submission of incomplete returns, or non-disclosure of income. In terms of the Tax Administration Act, Sars can impose penalties of up to 200% for understatement of income. It is crucial that all income, from both local and foreign sources, be fully disclosed to avoid such penalties.

Tax compliance plays a major role should you wish to apply for a foreign investment allowance or a tax clearance certificate. If you have outstanding income tax returns or if there is any money outstanding on your tax profile, Sars will not issue such clearance.

What important documents/information will I need to complete my tax return?

Before you meet your tax practitioner, here are the most important documents and/or information you’ll need to have on hand to complete your 2022 return:

• A comprehensive statement of your assets and liabilities, including the market value of your worldwide assets.
• Any changes to your income and allowable tax deductions that may influence your return.
• Details of any sales or purchases of fixed property or shares during the year of assessment ended February 28 2022, and a schedule of the capital gains and losses.
• Proof and details of any other receipts or accruals, as well as details of exempt income, or income of a capital nature, such as donations or inheritances.
• All receipts for donations made to recognised public benefit organisations (PBOs), including charities, certain educational institutions and religious bodies — note that the PBO registration number must be reflected on the receipts for the donation to be allowed as a deduction.
• Proof of your medical aid contributions and receipts or proof of payments for medical expenses paid by you.
• All IT3(b) and IT3(c) certificates in respect of interest or dividends and capital gains or losses.

For an annual fee, Sanlam Private Wealth's tax compliance team will provide an end-to-end, all-inclusive tax administration and compliance service for individuals, deceased estates and trusts. Contact Rene Klein on 011-778-6662 or 071-863-5202, or email renek@privatewealth.sanlam.co.za.

This article was paid for by Sanlam Private Wealth.